Berkshire Hathaway Results

Warren Buffett likes to release the annual report for Berkshire Hathaway on a weekend so their shareholders can digest them properly over non-trading days. I would recommend any investor read his commentary as it provides valuable insight into his perspective as well as how he has managed the vast resources of Berkshire. Nearly everyone can learn something from Warren’s writings!

I am feeling particularly happy after reading this year’s report. I posted the article ‘Buying Buffet’ about 10 weeks ago when the price was $99,300. This was the price I bought at. Today, BRK.A shares are worth $119,800 each … a 20.6% gain in less than 3 months.

More importantly than the above (as I bought these shares as a long term investment – i.e. greater than 5 years) the Net Asset Value per Share of Berkshire Hathaway is ~$84,500. This is *book value* and as Warren Buffett mentions several times in his annual report this year, he feels that BRK’s book value is significantly lower than the true value of its business holdings – especially the large insurance companies owned (GEICO, General Re & Berkshire Hathaway Reinsurance). Knowing that I bought within 20% of this discounted book value figure makes me feel very comfortable that I timed the purchase right and can sit back and let Warren do his magic as the global economy emerges from recession. Even if the companies and investments do not gain in value, Berkshire generates between $3000 (in deep recession) and $8500 in cash per A-share, ensuring that NAV grows by 3-8.5% per year no matter what. Turnover for the entire Berkshire Hathaway group of companies is now $112billion. I can’t think of a safer investment.

Historically, Berkshire Hathaway shares are still not expensive. They have typically averaged 1.6-1.8 times book value. Currently they are still ‘only’ 1.4 times book value.